A Critical Note on the Forecast Error Variance Decomposition

Atılım Seymen

No 08-065, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: The paper questions the reasonability of using forecast error variance decompositions for assessing the role of different structural shocks in business cycle fluctuations. It is shown that the forecast error variance decomposition is related to a dubious definition of the business cycle. A historical variance decomposition approach is proposed to overcome the problems related to the forecast error variance decomposition.

Keywords: Business Cycles; Structural Vector Autoregression Models; Forecast Error Variance Decomposition; Historical Variance Decomposition (search for similar items in EconPapers)
JEL-codes: C32 E32 (search for similar items in EconPapers)
Date: 2008
New Economics Papers: this item is included in nep-ecm, nep-ets, nep-for and nep-mac
References: Add references at CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/24761/1/dp08065.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:7388

Access Statistics for this paper

More papers in ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().